UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: February 9, 2023

Commission File Number: 001-39570

TIM S.A.
(Exact name of Registrant as specified in its Charter)

João Cabral de Melo Neto Avenue, 850 – North Tower – 12^th floor
22775-057 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes ☐ No ☒

TIM S.A. and TIM S.A. and subsidiary

INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

TIM S.A. and TIM S.A. and SUBSIDIARY

INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

Contents

Independent Auditor’s Report on Individual and Consolidated Financial Statements

To the shareholders, board members and directors of

TIM S/A

Rio de Janeiro – RJ

Opinion

We have audited the individual and consolidated financial statements of Tim S/A (the “Company”), identified as Individual and Consolidated, respectively, which comprise the statement of financial position as at December 31, 2022, and the statements of profit or loss, of comprehensive income, of changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and consolidated financial position of TIM S/A as at December 31, 2022, and its individual and consolidated financial performance and cash flows for the year then ended in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Basis for opinion

We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the individual and consolidated financial statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants, the professional standards issued by the Brazil’s National Association of State Boards of Accountancy (CFC) and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the individual and consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

Provision for tax related contingencies

As disclosed in the note 25 to the financial statements, the Company is a party to numerous tax claims and proceedings at different jurisdictional levels, which amounted to R$18,644 million, as of December 31, 2022, for which a provision amounting to R$473 million was recorded in the financial statements, while the remaining R$18,171 million was disclosed as possible losses, in accordance with CPC 25 (IAS 37) Provisions, Contingent Liabilities and Contingent Assets. The determination of the provision and disclosures related to the tax contingencies involves significant judgment from management, including their analysis of the matters in dispute, the opinion of internal and external legal counsel and the estimation surrounding their ultimate resolution.

In addition, in view of the magnitude of the amounts involved, any changes in estimates or assumptions that impact the determination of the loss prognosis may have significant impacts on the Company’s financial statements. Accordingly, this was considered a key audit matter.

How our audit conducted this matter

Our audit procedures included, among others: (a) obtaining an understanding and evaluation of the design of controls over the identification and evaluation of tax claims, including management’s process to determine whether the technical merits are more-likely-than-not to be sustained in court and over the generation of the report produced by the information technology system that support this process; (b) involving our tax professionals to assess the Company’s technical merits regarding certain matters in dispute, obtaining and analyzing external legal opinions, obtaining internal and external legal counsel confirmation letters, meeting with internal legal counsel to discuss certain tax disputes, and obtaining a representation letter from the Company’s internal legal counsel; and (c) assessing the adequacy of the disclosures made by the Company in note the 25 in respect of provision for tax related contingencies.

Based on the result of audit procedures performed in the provision for tax contingencies and related disclosures, which is consistent with management’s assessment, we understand that the measurement of tax claims assessed as probable and possible loss, as well as the respective disclosures in the note 25 are acceptable in the context of the financial statements taken as a whole.

Acquisition of Cozani RJ Infraestrutura e Rede de Telecomunicações S.A. (“SPE Cozani”)

As disclosed in the note 1.2 to the consolidated financial statements, the Company acquired 100% of the shares of the SPE Cozani for a purchased consideration of R$7,212 million. The acquisition was accounted for as a business combination. Therefore, the Company estimated the fair value of assets acquired and liabilities assumed as well as estimated its contingent consideration using valuation models and assumptions about future business performance (including revenue growth rates and annual churn).

Auditing the Company’s business combination accounting is complex and involved significant auditor judgment due to the significant estimation uncertainty related to the assumptions used by management in determining the fair value of assets acquired and liabilities assumed, mainly with reference to customer relationship. Management projections and underlying assumptions are forward looking and could be affected by future economic events and market conditions.

How our audit conducted this matter

We obtained an understanding and evaluated the design of controls over the Company’s accounting process for business combination, including controls over the identification, recognition and measurement of the fair value of assets acquired and liabilities assumed and we also management´s controls over evaluation of underlying assumptions such as revenue growth and annual churn.

To test the estimated fair value of assets acquired and liabilities assumed, our audit procedures included, among others, assessing the Company's financial information forecast model and the significant assumptions used by the Company, testing the completeness and accuracy of the underlying data, comparing significant assumptions to market and economic trends and industry benchmarks and involving our valuation specialists to assist with the evaluation of the methodologies and models applied by management. We also assessed the disclosures made by the Company with respect to the business combination disclosed in the note 1.2.

Based on the result of the audit procedures performed in the acquisition of the SPE Cozani and related disclosures, which is consistent with management’s assessment, we understand that the measurement of sale as well as the respective disclosures in note the 1.2 are acceptable in the context of the financial statements taken as a whole.

Other matters

Statements of value added

The individual and consolidated statements of value added (SVA) for year ended December 31, 2022, prepared under the responsibility of Company management, and presented as supplementary information for purposes of IFRS, were submitted to audit procedures conducted together with the audit of the Company’s financial statements. To form our opinion, we evaluated if these statements are reconciled to the financial statements and accounting records, as applicable, and if their form and content comply with the criteria defined by NBC TG 09 – Statement of Value Added. In our opinion, these statements of value added were prepared fairly, in all material respects, in accordance with the criteria defined in abovementioned accounting pronouncement and are consistent in relation to the overall individual and consolidated financial statements.

Other information accompanying the financial statements and the auditor’s report

Management is responsible for such other information, which comprise the Management Report.

Our opinion on the individual and consolidated financial statements does not cover the Management Report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free of material misstatement, whether due to fraud or error.

In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and its subsidiaries’ financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Brazilian and International standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

We communicate with those charged with governance regarding, among other matters, the scope and timing of the planned audit procedures and significant audit findings, including potential significant deficiencies in internal control that we may have identified during our audit.

We also provided those charged with governance with a statement that we have complied with relevant ethical requirements, including applicable independence requirements, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Rio de Janeiro, February 9, 2023.

ERNST & YOUNG

Auditores Independentes S/S Ltda.

CRC SP-015199/F

Fernando Alberto S. Magalhães

Contador CRC SP-133169/O

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

The explanatory notes are an integral part of the financial statements.

COMMENTS TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2022

Dear Shareholders,

The Management of TIM S.A. (“TIM S.A.”, “Company” or “TIM”) hereby presents its Management Report and 2022 Earnings Analysis, along with the Individual and Consolidated Financial Statements accompanied by the Independent Auditors’ Report for the fiscal year ended December 31, 2022.

The financial statements were prepared in accordance with accounting practices adopted in Brazil, which include the Brazilian Corporate Law, the rules of the Brazilian Securities and Exchange Commission (CVM) and the pronouncements of the Accounting Pronouncement Committee (CPC) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

The operating and financial information for the year ended in December 31, 2022, unless otherwise stated, is presented in Brazilian reais (R$), based on consolidated amounts and pursuant to the Brazilian Corporation Law.

Company’s Profile

TIM S.A. is a publicly held company, with shares listed on the São Paulo Stock Exchange (B3), and American Depositary Receipts (ADRs) listed on the New York Stock Exchange (NYSE). In 2022, TIM confirmed that, for the 15^th year in a row, has maintained its status as one of a select group of companies that comprise the ISE portfolio (B3’s Corporate Sustainability Index), reinforcing its commitment to economic, social and environmental sustainability. Additionally, since 2011 TIM has been listed on B3’s Novo Mercado, a segment recognized for maintaining the highest level of corporate governance. Starting in 2021, it became part of the following indexes: S&P-B3 Brasil ESG, Refinitiv Diversity & Inclusion, and Bloomberg Gender Equality.

TIM S.A. is controlled by TIM Brasil Serviços e Participações S.A., a subsidiary of the Telecom Italia group. TIM operates in the mobile, landline, long-distance, and data transmission markets throughout Brazil, as well as in the ultra-broadband market covering several Brazilian states.

The year 2022 was marked by two major transformations of the sector, of which TIM is the protagonist: the launch of 5G technology and the end of the cycle of consolidation of the mobile phone market. In this context, we stand out, because we lead the implementation of the 5G network, quickly becoming the largest and best coverage in key markets such as São Paulo, Rio de Janeiro, Curitiba and Recife. Within the M&A process, we execute our strategy of integrating Oi Móvel's acquired assets at an excellent pace, quickly capturing synergies and creating value for our shareholders and customers.

External Environment

This last year presented great challenges and opportunities regarding the external environment of the Company and the sector. If on the one hand, the polarized political environment, and heated emotions due to the majority elections caused a lot of noise, uncertainty, and volatility. On the other hand, what was seen was a continuity in the process of economic recovery in the post-pandemic, with several macroeconomic indicators presenting good performance, such as maintenance of the low unemployment rate, reduction of inflationary pressures and growth of the economy.

TIM, always focused on the execution of its strategic plan, managed to navigate well in this environment of ups and downs, capturing the opportunities offered and circumventing the obstacles that were placed in front of it.

M&A and 5G: Sector and TIM Transformations

As previously mentioned, the major sectoral transformations, which began in 2021, took shape in 2022 with: (i) the launch of 5G coverage in the country's capitals; (ii) the closing of the Oi Móvel purchase transaction and subsequent start of integration of the acquired assets; and (iii) start of broadband operation under the asset-light model after the creation of the fiber optic infrastructure company i-Systems.

Focus on Strategy Implementation

With so many fundamental fronts for TIM's future and a very complex external environment, it was necessary to redouble the focus on executing the strategy that we outlined and communicated to the market during our TIM Brasil Day in May. As a result, we achieved great achievements throughout 2022: we were recognized for our excellence in handling complaints through Reclame Aqui; we received the Great Place To Work certification; we innovated in the launch of 5G in social impact partnerships with Gerando Falcões and brand impact as the sponsorship of Rock in Rio; we were the first operator to cover 100% of the country's municipalities with mobile telephony service; our inclusion policies were recognized with leadership in Refinitiv's ranking of the most diverse telecom company in the world; in addition to several other important brands.

In terms of numbers, throughout 2022, we had an outstanding performance. Our net revenue grew close to 20% when compared to 2021. EBITDA reached 10 billion Reais growing solidly (excluding the extraordinary effects of 2021) double digits. The margin remained high at around 47%. And we ended the year with a profit of close to 1.7 billion Reais. With this solid performance, it was possible to increase the level of distribution to shareholders, having already announced and paid approximately 1.4 billion Reais and proposing another 600 million, still referring to 2022, to be approved at the next annual meeting.

Conclusion and Perspectives

Our ability to stay focused and execute the plans we set out helped us to meet all the goals we had for 2022, including meeting all the goals we communicated to the market.

The expectation for 2023 is to consolidate the transformation process of TIM and the sector with the completion of the integration of the assets purchased from Oi Móvel, the expansion of the “real” 5G coverage and the change in the broadband paradigm fixed for neutral networks. We also hope to capitalize more on initiatives on the digital transformation and new business fronts, creating great opportunities for efficiency and growth for TIM.

2. Economic and Industrial Overview

2.1. Macroeconomic Environment

With a scenario of uncertainties, mainly in a year of elections that would become totally polarized, which was confirmed, the prospects for the year 2022 were not so positive for Brazil.

Despite initial expectations, Brazil recorded a decrease in the unemployment rate (8.7%^[1] in the third quarter of the year), registering the lowest number since 2015 and continuing a series of declines over the last quarters, impacted by the process of immunization against COVID-19 started in the previous year. Government measures on the eve of elections, such as the expansion of the Auxílio Brasil program, were factors that helped boost economic activity. Thus, the projection of the Brazilian Gross Domestic Product (GDP) ended the year at 3.04%, according to the latest FOCUS report^[2] for the year, compared to the 0.28% growth forecast in the first FOCUS report^[3] of 2022.

Inflation, measured by the Extended Consumer Price Index (IPCA), ended 2022 at 5.62%^[4], above the estimated target for the year (3.5%). Among the factors that impacted such result, the food industry recorded an increase of 11.6%, compared to 7.9% in the previous year, as a result of worse weather conditions during the period. Increases in commodity prices, mainly oil, also played a role in pushing inflation above the target ceiling for the second year in a row.

In 2022, the exchange rate recorded great volatility, with the Real appreciating against the US dollar in relation to the end of the previous year. At the last closing period, the American currency ended quoted at R$ 5.28, accounting for a decrease of 5.2%. Uncertainties regarding American inflation and external factors such as the War between Russia and Ukraine contributed to the oscillation scenario presented by the currency. In relation to the Brazilian Real, the American currency recorded a high of R$ 5.68 against a low of R$ 4.60 during the year, accounting for a change of 23.5% in a scenario of domestic uncertainties, fiscal risks and many discussions about, for example, the Transition Constitution Amendment Proposal (PEC), not allowing a better performance of the Brazilian currency against the US dollar. The trade balance ended the year with a surplus of US$ 62 billion, accounting for an increase of 1.6% compared to the end of 2021. Exports closed the year at US$ 355 billion and recorded a positive change of 19.3% compared to 2021. Imports recorded US$ 272.7 billion, accounting for a growth of 24.3% in the annual comparison. The export and import values represent the highest records of the entire historical series.

The international scenario was marked by many uncertainties and volatility with high inflation rates, led by commodity, food, and logistical and production bottleneck, as well as a reduction in GDP growth rates in most countries. The United States showed a slowdown in the inflation rate to 7.8%, a percentage that reached 9.1% at the maximum level for the year, and GDP growth of 2.1% compared to an expansion of 5.9% in 2021. The economy in Europe shows a low pace of growth, greatly impacted by the effects of the war between Russia and Ukraine, affected the pace of the resumption of the post-pandemic economy. China suffered from new lockdowns due to the COVID-19 pandemic, impacting its economic activity, which showed an improvement in the third quarter. The GDP of the Organization for Economic Co-operation and Development (OECD) member countries increased 0.4% in the third quarter. The International Monetary Fund (IMF) points to a forecast of 3.2% ^[5]growth for the global economy in 2022.

^[1] Source Brazilian Institute of Geography and Statistics (IBGE).

^[2] Estimated by the FOCUS report issued by the Central Bank of Brazil (BACEN) as of December 31, 2022.

^[3] Estimated by the FOCUS report issued by the Central Bank of Brazil (BACEN) as of January 7, 2022.

^[4] Source: Brazilian Institute of Geography and Statistics (IBGE).

^[5] Source: International Monetary Fund

2.2. Particularities of the Telecommunications Sector

The telecommunications sector in Brazil is marked by the high degree of competition and by the effective regulation of the National Telecommunications Agency (ANATEL), which has the mission of “promoting the development of telecommunications in Brazil, in order to provide it with a modern and efficient telecommunications infrastructure, capable of offering society appropriate and diversified services at fair prices nationwide”.

Throughout its trajectory, the sector has always been impacted by fierce competition on the Brazilian market, which can be seen by the presence of very aggressive offers from the viewpoint of the content available to customers and the reduced level of prices charged by operators in general. However, in recent years, this competition has moved more towards issues related to quality and service, becoming more rational from the point of view of prices. In the last year, it is possible to say that we had a process of continuity of this transition to a new model of competition.

During the year 2022, the acquisition process of the mobile operation assets of Oi Móvel S.A. was completed by TIM, Telefônica Brasil S.A. and Claro S.A., after all the precedent conditions provided for by the National Telecommunications Agency (ANATEL) and by the Administrative Council for Economic Defense (CADE) were fulfilled. However, the buyers initiated an Arbitration Proceeding regarding the Adjusted Closing Price, after understanding that there were differences in assumptions and calculation criteria in some terms of the operation, which they only had access to after the conclusion of the operation. The sale of the mobile operation was part of the Court-Ordered Reorganization Process of Oi S.A., which, after 6 and a half years, was closed by the judge in charge, who understood that the Company fulfilled all the obligations assumed during the process.

Finally, the year 2022 was marked by the start of the implementation and expansion of 5G technology in Brazil, which seeks to meet the demand for higher connection speeds. In this context, TIM ended 2022 having implemented 5G technology in all 27 capital cities of the country, with a much higher number of antennas than required by ANATEL, thus providing a better experience for the user.

3. TIM Services

3.1. Business

TIM is recognized for its strong brand and its reputation as an innovative and disruptive company, capable of meeting new consumption patterns on the market. The proactive approach has allowed the Company to be in a leading position in the transformation of the telecommunications business model. Changes in customers’ usage profiles and the emergence of new technologies have fostered a rupture in the industry, based on the consumption of data, content, and digital services.

TIM’s pioneering spirit and innovative offerings are hallmarks of the Company, which has a complete portfolio both for individual customers and corporate solutions for small, medium, and large enterprises. In addition to the traditional mobile voice and data services, TIM offers the fixed ultra-broadband service, and continues to pursue new sources of revenue, with pioneering initiatives in new business fronts, such as financial services and monetization of the client base, mobile advertising, and IoT.

Also in its portfolio, the Company offers several services and digital content in its packages, increasing the functionality of mobile devices in its customers’ daily lives. The ability to manage a complete and wide-ranging portfolio makes it possible for TIM to offer tailored packages to its customers and to propose convergent offers in certain regions.

Demonstrating this differential, TIM started a partnership in 2022 focused on the digital security and entertainment segments, offering reading plans to TIM customers, through access to digital books through applications. TIM remains focused on opportunities that can generate fast growth and develop partnerships in different segments, with the purpose of continuing to generate value for the Company’s customers, shareholders, and partners. Innovation in offers and consistency in the operation have ensured the portfolio’s differential and a higher quality in the acquisition of new customers.

3.2. Strategy

With the update of the Company’s strategic plan, TIM reinforces the search for sustainable business growth considering all stakeholders and aiming to create value for each of them. In this context, the plan designed by the Company is centered on strategies of evolution of the existing business with incremental innovations and initiatives that improve TIM's relative position. At the same time, new fronts are opened seeking business transformation with more disruptive changes, entry into new markets and capture opportunities that go beyond TIM's core business. Among the levers to achieve our aspiration, we can mention the following:

All the strategic pillars are directly related to our commitment to the User Experience, which is one of our three mainstays of the TIM brand (also including innovation and quality), in addition to being aimed at strengthening our core and building the company’s future.

4. Human Resources

The Human Resources Executive Board, which has been renamed People, Culture and Organization Executive Board as of July 2022, is structured with the purpose of ensuring the best practices related to people management to support the evolution of the Company, aligned with technological transformations and business challenges, the commitment to sustainability and the appreciation of diversity and inclusion. In addition to always seeking the evolution of the work model, the construction of ecosystems for the continuous development of skills, the promotion of care and well-being for our employees in all dimensions.

Having an engaged team is essential to overcoming challenges and achieving better results. At TIM, the relationship of transparency and respect with all levels of the company strengthens our pride and sense of belonging, as well as a clarity as to the direction we are heading. These factors are differentiators in the development of our employer brand and employee experience.

In 2022, we had a (96%) participation in the Climate and Engagement Survey, confirming the consistency of this process as one of the most important means of listening to people and providing the opportunity to contribute toward the evolution of our company.

The result of the 2022 Climate and Engagement Survey was 86% (+3%), placing TIM 14% above the Global Telecom Market and 11% above the Mercer General Market, a consulting partner responsible for the survey methodology and application.

In 2022, we recorded growth in all 9 dimensions of the survey, with emphasis on Fair Reward (+8pp) and Healthy Environment (+5pp), which are ranked among the Best Practices according to the favorability achieved. Among the questions with the highest growth, those related to the Benefits offered (+19pp), Recognition (+9pp) and Balanced life (+7pp) stand out, in line with the action plan implemented in 2022, such as the launch of the Wellbeing Connection program, the evolution of health care plans, among other initiatives. 

The integrity culture remains the most recognized dimension, reaching a 90% favorability, with +2pp growth and needing a further 1pp to rank in the Best Practices market. Emphasis on the promotion of an inclusive environment (96% | +1pp) and an environment free of harassment and discrimination (94% | +3pp), thus corroborating the focus on Diversity & Inclusion and the strengthening of the Reporting Channel.  

In 2023, we will continue implementing structured actions for the well-being of employees and readiness for change, through actions that favor organizational agility, aiming to maintain care for people and the search for innovation.

4.1. People

TIM ended the year 2022 with 9,406 employees across Brazil. These employees – with their histories and knowledge – represent the Company’s intellectual capital and act as engines for business development.

Around 68.3% of our employees have a college degree or are currently attending college, and 9.4% have postgraduate degrees. The numbers and results show that TIM has a diversified and highly qualified staff to meet the Company’s challenges. The workforce is rounded out by 237 interns and 141 young apprentices.

4.2. Development and Training

In 2022, TIM once again evolved in people development practices, focusing on digitization, customization, and inclusion.

Through surveys, benchmarking, and discussions with internal stakeholders, we evolved the performance management process to add even more value to our employees. Throughout the year 2022, three evaluation cycles were launched, involving over 5,600 people.

In July, we launched the first evaluation of peers/customers by project, opening the 2022 cycle with improvements in the experience of our internal customers.

At the end of 2022, we made further progress on improvements, bringing new elements beyond the skills to ensure a more comprehensive view of people: motivation and social reputation. In two years, we went from a process that reinforced an evaluative culture to building a culture of development and feedforward, with a fully customized, focused, and nimble process. In our people development strategy, we use the same assumptions: customization and added value. All learning practices and development programs are based on TIM’s strategy, business priorities and the evolution of people’s areas and skills.

For example, for leadership development, new editions of the E-Coaching and Intercompany Mentoring programs were launched, reaching over 270 leaders.

In the E-Coaching program, around 85 senior management leaders experienced a 5-session short-coaching digital journey with a certified coach and/or by the International Coaching Federation (ICF), with the purpose of accelerating their growth and facing their management challenges. So far, over 340 leaders have participated in this program since 2020.

Another relevant program was Intercompany Mentorship, in partnership with the “Positive Women” initiative. In this program, 193 female leaders from 23 different companies participated in the third wave of this innovative initiative, with the purpose of promoting reflection, awakening empowerment and accelerating the career development of women.

For Talent Management, we evolved in the design of a new model that segments the company into four large clusters: Strategic Talents, Leadership Talents, Professional Talents and Critical Knowledge Talents.

For senior leadership, we continue mapping the executives who will ensure the long-term continuity of the business. Another wave of the Top Executive Assessment in partnership with an external Leadership Advisory firm helped us mapping and accelerating the development of senior executives who will feed into the company’s succession plan.

For middle management and professional talent, a new mapping cycle is planned for 2023 and will help us to have visibility of the key people who will feed the pipelines and make the difference in the areas.

For critical knowledge talent, over 300 people who work in New Capabilities were mapped this year. For them, retention, recognition, and education actions were prioritized, contributing to the reduction of turnover in this group.

In terms of education and learning initiatives, TIM’s strategy and focus in 2022 was to support the evolution and transformation of the business based on the development of new skills through upskilling/reskilling programs.

To support and evolve with the Digital Learning process, we reformulated TIM Brasil’s Education Model and launched TIM + Conhecimento, our Learning Hub that consolidates individual and collective journeys for employee learning on strategic business topics, such as mindset and digital skills, innovation, governance, customer experience, change management, among others. Since its launch, our portal reached 93,000 accesses.

TIM + Knowledge is composed of three fronts: Você + TIM, which aggregates everything an employee needs to know about our TIM: information on the organization, strategy and evolution of our business, ESG commitments, values and guidelines; Você na Frente (You Ahead), which adds everything an employee needs to be the professional of the future and leverage the development of his/her career; Você + TECH, which adds everything an employee needs to develop the required skills and act with technical excellence in his/her area, promoting digital acceleration.

Furthermore, we strengthened Plural, an internal multiplication program that aims to support the process of developing essential technical and behavioral skills for the business. The program provides the protagonism of multiplier employees in the content creation and connects people in a learning network where knowledge sharing takes place in a strategic, democratic, customized and flexible way in topics such as Cloud, Agile, Data Strategy, CX, Digital Capabilities, Society Evolution, Digital Mindset, Institutional, Technique and Tools, among others. Through a recognition program, multipliers can score and exchange their points for educational actions and benefits, thus valuing their contributions to the business by sharing their knowledge and supporting the retention of these specialists in the company.

TIM also offered transversal initiatives such as:

TIM also developed/supported customized learning journeys for the different areas based on different needs related to the activity. In all, 11 events were launched with over 840 people impacted in the different areas of the business.

4.3. Innovation Ecosystem and Talent Attraction

Based on the strategic plan and on the innovation targets, TIM reinforced the brand positioning in the innovation ecosystem and launched initiatives to promote the development of digital and technological skills of people in society, improve talent attraction and increase the effectiveness in professional acquisition.

To qualify technology professionals, we have established partnerships with big techs, innovation institutes and universities to develop relevant education and employability programs. We also intensified talent attraction strategies aimed at professionals with the new capabilities, strengthening our employer brand in the technology market.

As part of this strategy, TIM partnered with big techs, such as Google Cloud and Microsoft, to encourage and develop technology training, offer free professional courses and attract qualified people to our team. We also offer a technical knowledge journey for students and researchers from 5Girls, a project by Universidade Federal Fluminense (UFF) that encourages the study of 5G technology and the participation of women in technological careers.

We also participated in the most important events and innovation trade fairs, where we present our company and technology cases and make vacancies available for application. At Hacking Rio, the largest hackathon in Latin America with over 1,700 participants, we held a lecture and a challenge on the future of 5G, which was among the 10 finalists of the marathon. At the Sci Biz Conference, an important global science and business conference, TIM offered 5G experiences and promoted conferences on technology, in addition to cloud computing, agribusiness and data science.

Furthermore, we held roadshows and lectures at 10 universities for over 890 students, sharing technical knowledge aligned with TIM’s business and career tips, converting 40% of students to the Internship Program website.

Our Internship and Young Apprentice programs are the major gateway for potential talent at TIM:

Internship Program: In September 2022, we launched another wave of the TIM Internship Program to hire talent for different areas, mainly in activities related to new skills and business evolution for the development of digital skills. Through promotional actions on social networks and relationships with universities, we reached 11,970 applicants for 86 vacancies. The recruitment process was based on an interactive experience with a gamified business case, where candidates could learn more about TIM and 5G technology. The internship program maintains its characteristic of strengthening TIM’s diversity and inclusion culture. This year, we had the challenge of attracting and hiring women for 50% of technology vacancies and we reached 61%. Overall, we reached 63% of selected women and reinforced TIM’s commitment to the racial pillar, reaching 54% of black people. During the program, interns have a diversified and personalized development journey, with online courses, mentoring, job rotation and business challenges, so that they can exercise and develop skills that will help them achieve new results.

Young Apprentice Program: in 2022, we had 8,748 applicants for TIM’s Young Apprentice opportunities. We hired 147 people between 18 and 24 years old across the country, who started their professional careers at TIM. The program has a strong social impact and is mainly aimed at people in situation of social vulnerability, with 65% of these new apprentices being black. This group’s journey has both theory and practice, with vacancies available in administrative areas, stores and call centers. During the development journey, apprentices have the opportunity to learn the basic skills that will help them start their professional careers and prepare for future challenges.

In recruitment practices, we improved the way we advertise our job opportunities in 2022 to a format in line with market practices, using better job descriptions, requirements, and responsibilities. Moreover, we also started to give candidates visibility to all the benefits that make up TIM’s Conecta Bem+Estar program, providing transparency, attractiveness, and engagement for opportunities. Such improvements are reflected in over 2.7 million views of our opportunities on talent attraction platforms (LinkedIn, Vagas.com and Success Factors). Following the evolution of the Recruitment processes, we also started the Project to implement a new Applicant Tracking System (ATS), enabling more intelligent tools based on data and artificial intelligence to increase agility and assertiveness in the recruitment processes, in addition to providing a more positive experience for candidates during the Recruitment and Selection journey.

4.4. Diversity and Inclusive Culture

Since the creation (in 2019) of an area dedicated to Diversity and Inclusion (D&I), TIM has been maintaining its efforts to disseminate a culture of respect and inclusion in the company and in Brazilian society, pursuant to its Diversity and Inclusion strategic plan and with the ESG Business Plan. Thus, the company creates a healthy work environment and gains a competitive advantage in the market.

In line with our Diversity and Inclusion strategies, we invested in hiring people with disabilities, reaching 62% of the Brazilian Legal Quota by August 2022, and we developed actions to hire minority groups such as transgender people, women, black people, and professionals aged 45 years or more.

In 2022, we maintained our 5 D&I pillars (Gender, Sexual orientation and gender identity, Race/Ethnicity, Generations, People with disabilities) and changed the name and performance of our area from People Caring & Inclusion Management to Ecosystem & Inclusion.

Furthermore, we implemented the Respect Generates Respect Program, which aims to combat violence, bullying and all types of harassment, establish a more inclusive culture in our company and in society through monthly training sessions and lives for all employees, including C-level and senior leadership, a new harassment policy, review of our processes, partnership with Avon Institute – the company that developed Angela, a WhatsApp chatbot that helps Brazilian women in situations of violence – and joining the Business Coalition to End Violence Against Women and Girls, an important business movement that fights against gender violence.

As a result of our continuous effort, TIM was recognized with several awards and diversity rankings in 2022:

Moreover, throughout 2022 and together with our Affinity Groups, other initiatives/actions were developed:

Speaking about employability, TIM also continued the so-called “Chama pro TIMe” program, focused on minority groups, where all employees are invited to nominate candidates from these groups, and sponsored events for the employability of minority groups, such as Afro Presence, with a focus on inclusion of black students in the labor market and promoted by the Public Ministry of Labor and the UN Global Compact; Black Women Power, focusing on the inclusion of black women in technological areas; Diverse fair to include LGBTI+ people in the market.

4.5. Long-Term Incentive Plan

The Long-Term Incentive Plan aims to grant TIM S.A. shares or stock options to employees of the Company and its subsidiaries, thereby seeking to promote the expansion, achievement and success of corporate goals and ensuring the alignment of interests of shareholders and TIM Management.

On April 10, 2014, April 19, 2018 and March 30, 2021, the Annual Shareholders’ Meeting of TIM S.A. (TIM Participações S.A. before the merger by TIM S.A. on August 31, 2020) approved the long-term incentive plans, “2014-2016 Plan”, “2018-2020 Plan” and “2021-2023 Plan”, respectively, granted to senior directors and to those who occupy key positions in the Company.

The 2014-2016 Plan addresses the granting of stock options, while the 2018-2020 and 2021-2023 Plans provides for the granting of shares (performance shares and/or restricted shares).

The exercise of the options of the 2014-2016 Plan assumes the achievement of specific performance targets that could affect only the acquisition price of the shares. The strike price is calculated by applying a plus or minus adjustment to the Base price of the share as a result of shareholder performance, taking into account the criteria provided for in each plan.

The 2018-2020 and 2021-2023 Plans propose to grant participants shares issued by the Company, subject to the participant’s permanence in the Company (achievement of specific goals). The number of shares may vary, for more or for less, as a result of the performance and possibly of the dividend award, considering the criteria provided for in each Grant. Generally, performance objectives are linked to economic-financial indicators and equity performance metrics (for example: Total Shareholder Return) and ESG - Environmental, Social & Governance indicators (for example: % of women in leadership positions and ecoefficiency), always in line with the objectives presented to shareholders for the Triennial Plan.

The term of validity of the options of 2014-2016 Plan is 6 years and TIM S.A. has no legal or non-formalized obligation to repurchase or settle the options in cash. For the 2018-2020 and 2021-2023 plan, the term of validity has the same periodicity of 3 years related to its vesting. In turn, the new Plans, in addition to considering the transfer of shares, also provides for the possibility of making payment to participants of the equivalent amount in cash.

As approved by the Company’s General Meeting of Shareholders, the Plans are managed under the responsibility of the Board of Directors, subject to the Company’s Articles of Organization.

Current Plans have a Clow Back clause which considers the return of payment, in whole or in part, obtained as a result of fraudulent behavior, attributable misconduct and/or error, without which the objective would not have been achieved or would have been achieved at a lower level. This clause can be invoked within three years following the transfer of shares or payment in cash.

Specifically for 2017, due to the fact that the Company started the process of restructuring its long-term incentive plan, on an exceptional basis and duly approved by the Board of Directors, the long-term incentive plan took the form of a bonus, with payment conditioned to the achievement of certain financial indicators of TIM, and was divided into three annual installments.

4.5.1. 2014-2016 Stock Option Cycle

4.5.2. 2018-2020 Stock Cycle

4.5.3. 2021-2023 Stock Cycle

5. Network

Infrastructure is one of the Company’s strategic pillars, and throughout 2022 TIM reaffirmed its commitment to invest, seeking to offer more and better services. Recent changes in consumption patterns, as well as the growing expectations of users regarding the quality of services provided, demand a structured plan for network expansion, supported by more robust technical analyses regarding the consumption pattern and the needs of its customers, in addition to a major cultural transformation.

In terms of spectrum use, TIM continues its successful refarming project, expanding to the 2.1 GHz frequency, aimed at better and more efficiency performance. Regarding fiber optics, the Company continues the network expansion project, to support the convergent ultra-broadband network, increasing the availability of FTTH and FTTS.

TIM maintained the Biosites expansion project, reaching 1,829 active biosites at the end of 2022. Biosites are sustainable structures of lower cost, easier to install, and do not cause visual impact in cities, to increase site density. In the context of Big Data, the Company continues to evolve its analytics tools based on more complete bases and a proactive approach, aimed at a more efficient targeting of investments.

Regarding corporate culture, new technologies and customer expectations cause a rupture in the traditional model of telecommunications operators. In this scenario, TIM aims to develop, motivate, and engage its employees to work in a dynamic, innovative and collaborative environment, based on a streamlined and flexible operating model.

5.1. National Coverage

TIM’s infrastructure has a national reach, becoming the first operator to cover 100% of the Brazilian urban population, with a presence in 5,570 cities. The Company also has extensive data coverage, maintaining its leading position in 4G coverage in Brazil.

In 2022, TIM continued to concentrate most of its investments in network and information technology, in line with what was practiced during previous years, with the aim of meeting the growing evolution of data consumption. The improvement and growth of the infrastructure are supported by different projects, among them the expansion of the fiber optic network (backbone, backhaul, and FTTH), site densification, frequency refarming, and aggregation of carriers in two or three frequencies (according to location). Moreover, TIM has been advancing in the sharing of initiatives focused on 4G and network transport. TIM also reinforces its 5G expansion, already covering all capital cities in the country. The Company has also taken the same technology from the city to the countryside, being the leading company in the agribusiness segment, with 12 million hectares covered with 4G.

Regarding the main ongoing projects focused on the modernization and ongoing improvement of our infrastructure, we highlight the following:

Additionally, the use of the 700 MHz frequency in the development of the LTE network continues to evolve, providing significant improvement in customers’ usage experience, both in terms of performance – with higher download and upload speeds and lower latency – as well as in indoor coverage – with greater penetration.

Fixed broadband coverage reached a total of 4.5 million homes passed by FTTH in 2022, while FTTC ended the year with 3.0 million. This represents a total of 6.1 million homes passed in 41 cities.

5.2. Quality

For another year, TIM reinforced its commitment to the enhancement of its services and continuous quality improvement to ensure the best user experience for its clients. The focus on the expansion and improvement of its network infrastructure remains a pivotal pillar in our business plan.

Due to a substantial increase in terms of 5G coverage and availability, TIM won two awards from Opensignal, an independent global label in consumer mobile experience analytics. In the study carried out, the 5G users who participated in the analysis remained connected to 5G services on TIM’s network 11.4% of the time – a relevant increase of approximately 10 percentage points compared to the previous report.

TIM has also recorded a 7x growth in its 5G reach score – from 0.5 points in the previous report to 3.4 points on a 10-point scale. This score means that users were connected to 5G services in more than 3 out of 10 places they visited. These two recognitions, best “5G availability” and best “5G coverage” only confirm the Company’s commitment to always deliver the best service to its customers.

6. Operating Performance

6.1. TIM’s Performance

The year 2022 was marked by the merger of the customers acquired from Oi Móvel and, as a result, at the end of 4Q22, TIM had 62.5 million mobile accesses, generating an increase of 20.0% YoY compared to 4Q21 (reaching a market share of 24.8%). The effective migration of these customers, which started in August 2022, totaled 8.7 million migrated customers at the end of January 2023, of which 7.8 million in Prepaid and 900 thousand in Postpaid segments^[6]. The conclusion of the process is expected to occur in April 2023. The integration and subsequent disconnection of inactive customers from Oi Móvel in TIM’s base impacted both Postpaid and Prepaid segments. In the quarter, we disconnected 1.4 million postpaid customers and 3.7 million inactive prepaid customers that came from Oi.

Human Postpaid (formerly M2M) closed the year with a base of 22.9 million accesses, accounting for a growth of 21.4% in the annual comparison. The M2M customer base ended 2022 with a total of 4.3 million accesses (+8.6% YoY)

In the prepaid segment, TIM ended 2022 with a total of 35.2 million accesses, accounting for a growth of 20.7% compared to the end of 2021.

6.2. Fixed segment

TIM Live, the 6 times elected best broadband in Brazil by Estadão, is currently called TIM UltraFibra. The brand change follows the Company’s strategy of focusing on the expansion of fiber optic to more cities, taking the differentiated quality of TIM’s service to new regions and providing higher speeds for customers.

Regarding total users, at the end of the year, TIM UltraFibra had 716 thousand connections, sustaining its pace of growth (+4.6% YoY). In the quarter, the FTTH base maintained its expansion, reaching an increase of 37.5% compared to the previous year. The transition to fiber remained constant throughout the year and higher value plans, with speeds above 100 Mbps, continued to gain relevance in the broadband portfolio (accounting for 77% of the entire base). Another positive highlight was the voluntary churn, which continues to fall (-1.5 pp YoY in the quarter).

^[6] The classification of the base between the Prepaid and Postpaid segments is managerial.

7. Financial Performance

7.1. Operating Revenue

*The Customer Platform includes revenues from new initiatives such as Financial and Educational Services and Mobile Advertising.

In 2022, Total Net Revenue reached R$ 21,531, compared to R$ 18,058 in 2021, a 19.2% increase YoY, a result achieved from the contribution of all main lines: (i) Revenue from Mobile Services (+19.8% YoY) driven by the acquisition of Oi’s mobile assets and the Company’s strategy to monetize its customer base; (ii) Revenue from Fixed Service (+7.6% YoY), mainly driven by the consistent expansion of TIM UltraFibra (formerly TIM Live) (+10.7% YoY); and (iii) Revenue from Products (+25.0% YoY), which showed a strong positive result due to a better product sales mix and the successes of partnerships and campaigns carried out throughout the year.

Breakdown of Mobile Segment (net of taxes and deductions):

Mobile Services Revenue (MSR) grew by 19.8% YoY, reaching R$ 19,594 million in the fiscal year ended December 31, 2022. ARPU reached R$ 26.1 in 2022, accounting for a decrease of -1.0%, impacted by the addition of new customers from Oi, which had a lower average ticket.

Breaking down each mobile segment in the fourth quarter:

Interconnection Revenue (ITX) decreased by 15.6% YoY, as a result of the reduction in incoming traffic for the period. The incidence of MTR on Net Service Revenues reached 1.9% in 2022.

Customer Platform Revenue totaled 188 million, accounting for an increase of 57.4% in the annual comparison, with contribution from mobile advertising initiatives and digital service partnerships.

The Other Revenues line recorded an annual growth of 11.8% YoY, explained by the growth in revenue generated by sharing contracts and network swaps, reflecting the Company’s strategy to expand the fiber transport infrastructure (backbone and backhaul) with greater efficiency of capital allocation (Capex and Opex).

Breakdown of Fixed Segment (net of taxes and deductions):

Fixed Service Revenue totaled R$ 1,234 million, a 7.6% increase YoY; revenues from TIM UltraFibra (former TIM Live) were the main driver of this performance.

The growth of TIM UltraFibra, the main line of fixed revenue, was 10.7% YoY, presenting an ARPU of R$ 95.0 in the fourth quarter (+4.3% YoY). The performance is due to the following strategies: (i) continued migration of the FTTC base to FTTH, with a focus on customer retention based on improving the quality perception; and (ii) customer profitability through a more attractive portfolio of services for users and with greater added value for the Company – in December, 77% of base customers were on plans equal to or above 100 Mbps.

7.2. Operating Costs and Expenses

Operating Costs and Expenses reached R$ 11,482 million in 2022, a 33.5% increase YoY, due to a comparative basis affected by the extraordinary gain generated in the sale of 51% stake of the company, in I-Systems^[7] that occurred in November 2021, which was recorded reducing costs by approximately R$ 780 million.

Excluding the impact related to the non-recurring effect mentioned above, Opex was mainly affected by: (i) additional costs incorporated after the completion of the acquisition of Oi Móvel, such as 8 months of TSA – Temporary Service Agreement^[8], in addition to expenses linked to a larger customer base and infrastructure; and (ii) for I-Systems rental expenses^[9].

^[7] I-Systems was created in partnership with IHS Brasil in November 2021 as an open provider of fiber optic infrastructure. The transaction involved the sale of a 51% interest to the new partner upon payment of R$ 1.1 billion to TIM and a contribution of R$ 600 million to I-Systems’ cash.

^[8] The Temporary Service Agreement (“TSA”) is a temporary agreement to provide subscriber base management and maintenance services for the NOC (Network Operations Center), within the scope of the acquisition of Oi’s mobile assets. The TSA has an effectiveness of 12 months and has been adjusted to disregard services related to recharges.

Breakdown of Costs and Expenses Performance:

The Personnel line reached R$ 1,278 million in 2022, accounting for an increase of 13.5% in the annual comparison. This account was impacted by: (i) inflationary effects on salaries, bonuses and incentives–however, this impact occurs to a lesser extent since inflationary levels were already at high levels in 2021; and (ii) the effects related to the provision for employee profit sharing.

The Selling Group was one of the most impacted by the acquisition of Oi’s mobile assets, with a 24.1% increase YoY. Such performance reflects: (i) the increase in expenses related to the management of the customer base (billing, collection and service) and expenses with “Installation Fistel”, both resulting from the adhesion of new customers migrated from Oi; (ii) TSA costs with Oi (R$ 193 million); and (iii) higher advertising expenses, reflecting new marketing actions in the face of the launch of 5G, the welcome to Oi customers, the achievement of coverage leadership and tradicional seasonal campaigns in the 4^th quarter.

In 2022, the growth of the Network and Interconnection line reached 30.6% YoY, having as main factors: (i) higher costs related to infrastructure rental, after a transaction in wich TIM began to rent last-mile in fiber from ISS affiliate I-Systems; (ii) higher expenses related to the sites acquired in the transaction with Oi; (iii) higher expenses with VAS content providers; and (iv) expenses with third-party services related to network management.

General and Administrative Expenses (G&A) closed the year with growth of 19.7% compared to 2021, totaling R$ 907 million. This increase is primarily explained by: (i) higher expenses related to the systemic integration of new customers coming from Oi into TIM’s structure; and (ii) higher expenses with the Journey to Cloud project (migration of IT infrastructure to the cloud).

Accumulated Cost of Goods Sold (COGS) reached R$ 871 million, a 19.1% increase YoY, following the dynamics of handset revenue. This dynamic reflected a greater share in sales of high-value handsets and better performance. due to the Black Friday and Christmas offers.

Allowances for Doubtful Accounts (Bad Debt) reached R$ 626 million in 2022, increase 15% compared to 2021. The line continues to suffer the impact of a larger revenue base exposed to default, with the increase in the postpaid base, due to the merger of Oi customers. Despite these elements, the percentage of Bad Debt over Gross Revenue was 2.1% in the year, demonstrating the Company’s efficiency in the customer acquisition strategy, as well as in the collection and recovery of amounts due.

Other Operating Revenues (Expenses) totaled R$ 248 million, inverting the signal of this line when compared to 2021. This move is explained by the extraordinary gain recorded in 4Q21, due to the sale of control of the company I-System for R$782.2 million.

7.3. From EBITDA to Net Profit

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Equity in Earnings)

The Adjusted EBITDA at the end of 2022 totaled R$ 10.049 million, a 6.2% increase YoY. The main driver behind this result was the growth of the Services Revenue line, with the contribution of both mobile and fixed customers. The growth of this line would be even more relevant if the comparative basis (2021 fiscal year) did not have the non-recurring effect of the sale of control of I-Systems. The Adjusted EBITDA Margin ended 2022 at 46.7%, accounting for a -5.7 p.p. decrease.

Depreciation and amortization (D&A) / EBIT

The D&A line accumulated R$ 6,827 million, an increase of 19.9% compared to 2021, being one of the lines most impacted by the acquisition of Oi's mobile assets, due to the effect of the depreciation of the right to use the sites that arrived with the transaction.

EBIT closed the year 2022 with a total of R$ 3,160 million, a 15.9% decrease compared to the end of 2021. Once again, this performance is explained by the comparative basis with an extraordinary effect from the sale of the control of I-Systems.

Net Financial Result

The Net Financial Result reached a 120.4% increase YoY, totaling a negative result of R$ 1,439 million, mainly impacted by: (i) a higher volume of interest on leases, due to the lease agreements for the 7.2 thousand sites acquired in the Oi Móvel purchase agreement; and (ii) a higher Selic rate in 2022; (iii) a higher debt level after the completion of the Oi acquisition. Furthermore, the line was impacted by lower revenue generated by the mark-to-market effect relating to the subscription warrant for the capital of C6 Bank (Note 39 to the Financial Statements), subject to ongoing arbitration.

Income tax and social contribution

Income Tax and Social Contribution totaled R$ 50 million in 2022, compared to R$ 146 million in 2021, pointing to a 65.7% YoY reduction, mainly explained by a drop in the tax base as a result of the related effect the sale of control of I-Systems in 2021. In 2022, the effective rate was 2.9% vs. 4.7% in 2021.

Net Profit

In the year 2022, Net Profit totaled R$ 1,671 million, with EPS of R$ 0.70. This result represented a contraction of 43.5% YoY, once again largely explained by the comparative basis (2021 fiscal year) having an extraordinary effect from the sale of control of i-Systems.

7.4. Cash flow, Debt and CAPEX

Free Cash Flow (FCF) was negative by R$ 2,680 million in 20222, significantly influenced by disbursements related to the purchase of Oi Móvel's assets and acquisition of frequency licenses in 4Q21:

Net cash generated by operating activities was positive at R$ 9,429 million, representing a 6.4% decrease compared to 2021. Even with a good operating performance represented by Revenue and Adjusted EBITDA, this line was impacted by the payment of licenses and obligations relating to the auction of frequencies in the amount of approximately R$ 2.5 billion.

Net cash used in investment activities was negative by R$ 8,620 million, representing an increase of 28.9% compared to 2021, reflecting the payment for the assets acquired from Oi Móvel in the amount of approximately R$6.4 billion.

Net cash used in financing activities closed at R$ 3,489 billion, multiplying by almost 5 times the amount reported in 2021. This performance is a consequence of the reduction in new financing and the increase in disbursements with leasing contracts for mobile phone sites after receiving the assets from Oi Móvel.

CAPEX

Capex in 2022 totaled R$ 4,730 million, showing a negative change of -40.6% in the annual comparison. This result was impacted mainly due to the registration of investments in the acquisition of licenses in the frequency auction in 2021. Excluding this effect, Capex for 2022 would have grown 8% YoY due to the investments linked to the integration of Oi’s mobile assets, besides the implementation of 5G technology in the country.

DEBT AND CASH

Debt Profile

Net Debt

Debt by Maturity

Total Debt (post-hedge) at the end of 2022 was R$ 18,575 million, a R$ 5,055 increase YoY. The amount considers the recognition of financial leases merged with the acquisition of Oi’s mobile assets, in the total amount of approximately R$ 2.9 billion. Moreover, in the fourth quarter, the Company carried out a new disbursement of part of the credit facility already available with BNDES (Finem) of R$ 319 million at the cost of TJLP + 1.95% and a term of 2.8 years.

At the end of the year, the amount of financing (post-hedge) totaled R$ 5,086 million. The average cost of debt, excluding leases and licenses related to the 5G frequencies auction, was 14.2% pa (103.69% of CDI) in the quarter, accounting for an increase when compared to the cost of 9.5% pa (116. 35% of the CDI) in 4Q21, mainly impacted by the increase in the DI rate in the second semester of 2022.

At the end of the quarter, Cash and Cash Equivalents and Marketable Securities positions totaled R$ 4,739 million, a R$ 5,057 million decrease YoY, largely due to the acquisition of Oi’s mobile assets carried out in 2Q22, concurrently with the payment of installments related to the acquisition of frequencies in the 2021 5G spectrum auction (full payment of EAF installments and payment of EACE installments and the 5G license for the year 2022). It should also be highlighted that in October 2022, the Company made a court deposit of R$ 670 million due to the discussion of the adjustment of the acquisition price of Oi Móvel.

The average financial yield was 14.2% pa (104.09% of the CDI) in 4Q22, a 5.5 pp increase compared to 4Q21, due to a higher level of the basic interest rate.

8. Environmental, Social & Governance

ESG Journey

TIM is a pioneer in ESG (Environmental, Social & Governance) topics in the Telecommunications sector in Brazil. The Company has been part of the B3 Sustainability Index Portfolio (ISE-B3) for 15 years, being the company in the sector that has been part of the Index for the longest time. In February 2023, TIM was once again recognized as one of the most sustainable companies in the world by S&P Global ESG, the organization responsible for the Dow Jones Sustainability Index (DJSI), and was included in the Sustainability Yearbook.

Since 2011, TIM has voluntarily been part of the Novo Mercado, the highest level of corporate governance on the Brazilian Stock Exchange, in addition to being the first and only telecommunications operator named as a Pro-Ethic company by the Brazilian Office of the Comptroller General (CGU) for two consecutive years.

As a signatory of the UN Global Compact since 2008 and UN Women since 2021, TIM develops projects connected to the Sustainable Development Goals (SDGs) and recognizes the rights to data privacy, secure internet, access to information and freedom of speech as essential and non-negotiable.

TIM has become a benchmark in the promotion of diversity and inclusion at national and international level, with targets, commitments, and implementation of several initiatives on gender, race, LGBTI+ people, generations, people with disabilities, among others. In 2021, the Company became the first Brazilian operator to integrate the Refinitiv Diversity & Inclusion Index, holding the 1^st position in Telecom at a global level, a highlight that it also maintained in 2022. TIM was also the first operator to win the GSMA’s Diversity in Tech international award, which recognizes worldwide organizations with practices in favor of equality, diversity, and human rights in the technology sector. In 2023, TIM continued to be part of the Bloomberg Gender Equality Index, which gathers 485 companies from 45 countries, and only 16 from Brazil.

Recognized with the Top Employers certification seal for the second consecutive year, TIM is also consolidated as one of the companies with the best HR practices. The certification is the result of an independent audit by the Top Employer Institute, an international institute with 30 years of experience in 120 countries. In January 2023, the Company also joined B3’s GPTW Index, which considers companies certified by the Great Place to Work (GPTW) as the best work environments in Brazil.

TIM responds to the Carbon Disclosure Project (CDP) – the world’s largest database on Greenhouse Gases related to Climate Change – since 2010 and records its emissions in the Public Emissions Registry of the Brazilian GHG Protocol Program.

Since 2004, TIM has been presenting its performance through sustainability indicators and it has been publishing reports in accordance with the guidelines of the Global Reporting Initiative (GRI) for 14 years. As of 2021, the Company started calling this publication the ESG Report and continues with its commitment to transparency and accountability to its stakeholders, organizing the report in the three pillars: Environmental, Social and Governance. The Report is also assured by an independent third party.

Our Policies on Social Responsibility, Human Rights, Diversity, Environment, Climate Change Management, Corporate Risk Management, Anti-Corruption, Relationship with Suppliers, Occupational Health and Safety, Privacy, among others, are publicly available for free consultation by our stakeholders.

In compliance with the General Data Protection Law, in force in Brazil since 2020, TIM works to ensure customer privacy, protect their personal data and maintain an increasingly transparent relationship. For further information, please consult the Privacy Center on the TIM website.

In 2013, TIM founded the TIM Institute with the mission of democratizing access to science, technology, and innovation to foster human development in Brazil. Over 700,000 people from all states and the Federal District have already benefited from the Institute’s education and inclusion projects, including internationally awarded prizes (Governorte Award – IDB 2015).

Due to its sound performance in ESG, TIM integrates national and international indices and ratings, such as the Corporate Sustainability Index (ISE-B3), Carbon Efficient Index (ICO2-B3), Brazil ESG Index (S&P/B3), GPTW Index of B3, CDP Brazil Index of Climate Resilience (ICDPR-70), Refinitiv Diversity & Inclusion, Bloomberg’s Gender Equality Index (GEI), FTSE4GOOD Emerging Markets, FTSE4GOOD Latin America, MSCI ACWI ESG Leaders, MSCI Emerging Markets ESG Leaders, Teva Women in Leadership Index, Women on Board seal, among others, in addition to being ISO 9001 (since 2000), ISO 14001 (since 2010) and ISO 37001 (since 2021) certified.

Material Topics

In 2022, TIM renewed its materiality matrix based on the new trends, which consider impacts on the financial and socio-environmental perspectives, the so-called double materiality. The construction of the new head office included the phases of definition, identification, prioritization, analysis and validation, with 1,040 consultations being carried out with various stakeholders of the Company. At the end of the process, eight material topics for TIM were identified, as shown in the table below:

9. Corporate Governance

9.1. Company listed on the Novo Mercado (New Market) for 15 years

On August 3, 2011, TIM joined the “Novo Mercado”, a segment that concentrates companies committed to the best corporate governance practices.

The migration to the Novo Mercado resulted in benefits for all shareholders. The required rules, in line with the best corporate governance practices in markets such as the United States and Europe, leverage greater liquidity and share appreciation, thus allowing broader access to international markets, in addition to further strengthen the institutional image and increase confidence in the Company.

Moreover, TIM belongs to the select group of companies that make up the portfolios of the Corporate Governance Index (IGC), the B3 Differentiated Tag Along Stock Index (ITAG) and, for 15 years, the Corporate Sustainability Index (ISE), made up of companies that are committed to managing the risks arising from economic, environmental and social developments, in addition to being the first and only telecommunications operator named as a Pro-Ethics company by the Brazilian Office of the Comptroller General (CGU).

9.2. Corporate Governance at TIM

TIM is a publicly-held company, managed by a Board of Directors and a Statutory Executive Board, and supervised by a Tax Council. The Board of Directors is assisted by advisory committees, namely, the Statutory Audit Committee, the Control and Risk Committee, the Remuneration Committee and the Environmental, Social & Governance Committee.

The duties and responsibilities of the members of the Board of Directors, the Statutory Executive Board, the Tax Council and the advisory committees to the Board of Directors are provided for in the Brazilian legislation, in the Company’s Bylaws, in the Novo Mercado Listing Regulation, in the Board of Directors Internal Regulations, in the Statutory Executive Board Internal Regulations, in the Tax Council Internal Regulations and in the Internal Regulations of the advisory committees to the Board of Directors.

As active and responsible members of the community in which they operate, the Company and its management must base their actions on legality and ethics, based on three fundamental principles: transparency, honesty and loyalty.

In conducting its business based, in addition to ethics and loyalty, in good faith, the Company seeks to: (i) act with transparency in its business, (ii) promote fair competition; (iii) excellence in market competitiveness; (iv) serve the well-being and growth of the community in which it operates; (v) improve its human resources; and (vi) promote sustainable development.

9.3. Board of Directors

The Board of Directors (BoD) is composed of a minimum of five (5) and a maximum of nineteen (19) members, with a term of office of two years, with reelection being permitted. As of December 31, 2022, the BoD consisted of ten (10) members, four (4) of them independent. In 2022, the BoD met eleven (11) times in the exercise of its functions.

All decisions taken by the BoD are recorded in minutes, published and recorded in the minutes book of the BoD, filed at the Company’s headquarters.

The BoD meets ordinarily at least six times a year and twelve times at most, and, extraordinarily, upon call made by its Chairman, or by any two Board Members, or by the Company’s Chief Executive Officer. The Chairman of the BoD may invite any member of the Statutory Executive Board, other executives of the Company, as well as third parties who may contribute with opinions or recommendations related to the matters to be addressed, to participate in the meetings of the body. Those invited to attend BoD meetings do not have the right to vote.

The Board of Directors has four (4) advisory committees, all directly linked to it: the Statutory Audit Committee, with rules provided for in the Company’s Bylaws, the Remuneration Committee, the Control and Risk Committee and the Environmental, Social & Governance Committee, with one or more members being able to participate in the Committees simultaneously.

9.4. Statutory Board of Officers

The Statutory Board of Officers (Board of Officers) is the Company’s representative and executive management body, comprising a minimum of three (3) and a maximum of twelve (12) directors, elected by the Board of Directors for a two-year term, with reelection permitted, and may be removed by the same body at any time. As of December 31, 2022, the Company’s Board of Officers was composed by eight (8) board members. In 2022, the Board of Officers met forty-four (44) times in the exercise of its functions.

9.5. Fiscal Council

The Fiscal Council (CF) is the body that oversights the acts of the Company’s management and provides information to shareholders and must operate permanently. The Fiscal Council is composed of a minimum of three (3) and a maximum of five (5) effective members, all independent professionals recognized by the market, who do not maintain any other relationship with the Company, each with a respective alternate member, either a shareholder or not, elected by the General Meeting. As of December 31, 2022, the Company’s Fiscal Council was composed of three (3) effective members and an equal number of alternate members. In 2022, the CF met nine (9) times in the exercise of its functions.

9.6. Statutory Audit Committee

The Statutory Audit Committee (CAE) is a collegiate advisory body, directly linked to the Board of Directors, composed of at least three (3) and at most five (5) members, all of whom are independent. Currently, the Statutory Audit Committee is composed of three (3) members.

The purpose of the Statutory Audit Committee is to supervise the quality and integrity of financial reports, compliance with legal, regulatory and statutory standards, the adequacy of processes related to risk management and the activities of auditors, both internal and independent, as well as to supervise and evaluate the signing of contracts of any nature between the Company or its subsidiaries, on the one hand, and the controlling shareholder or its subsidiaries, affiliates, subject to common control or controlling companies of the latter, or that otherwise constitute related parties to the Company, on the other hand. In addition to its ordinary duties, the Statutory Audit Committee also serves as the Company’s Audit Committee, in accordance with the provisions of the Sarbanes-Oxley Act, to which the Company is subject, as it is a company registered with the US Securities and Exchange Commission – SEC. In 2022, the Statutory Audit Committee met fifteen (15) times in the exercise of its functions.

The members of the Statutory Audit Committee analyzed the Financial Statements, accompanied by the Independent Auditor’s Report and the Annual Management Report, for the year ended December 31, 2022 (“2022 Annual Financial Statements”). Considering the information provided by the Company’s Statutory Executive Board and by the external audit firm Ernst & Young Auditores Independentes S/S. (“EY”), as well as the proposed allocation of income for the year 2022, the Statutory Audit Committee assessed that this information and documents adequately reflect, in all material respects, the financial positions of the Company and its subsidiaries. For this reason, they unanimously recommended the approval of the aforementioned documents by the Company’s Board of Directors, for submission to the Annual Shareholders’ Meeting, pursuant to the Brazilian Corporation Law.

9.7. Control and Risk Committee

The Control and Risk Committee (CCR) is a collegiate advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most five (5) members of the Company’s Board of Directors, and, among other duties, must advise the Board of Directors in the evaluation of internal control and risk management measures, and compliance with governance rules. As of December 31, 2022, the CCR was composed of five (5) members, two (2) of which are independent. Throughout 2022, the CCR met eight (8) times in the exercise of its functions.

9.8. Remuneration Committee

The Remuneration Committee (CR) is a collegiate advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most five (5) members of the Company’s Board of Directors, and, among other duties, must advise the Board of Directors in the evaluation of proposals for apportioning the global remuneration approved by the General Meeting, and the criterion for the remuneration of Statutory Directors and senior executives of the Company. As of December 31, 2022, the CR was composed of three (3) members, one (1) of which is independent. Throughout 2022, the CR met four (4) times in the exercise of its functions.

9.9. Environmental, Social & Governance Committee

The Environmental, Social & Governance Committee (CESG) is a collegiate advisory body, directly linked to the Board of Directors, and must be composed of at least three (3) and at most five (5) members of the Company’s Board of Directors, and, among other duties, must advise the Board of Directors in development and implementation of the Environmental, Social & Governance strategy and principles, including, among other activities, the recommendation of the Company's guidelines and strategy applicable to the management of environmental, social and governance issues. As of December 31, 2022, the CESG was composed of five (5) members, two (2) of which are independent. Throughout 2022, the CESG met four (4) times in the exercise of its functions.

9.10. Shareholding structure

The Company’s share capital ended the year 2022 in the amount of R$ 13,477,890,507.55, represented by 2,420,804,398 common shares. TIM Brasil Serviços e Participações S.A. holds a controlling interest in TIM with approximately 67% of its shares.

9.11. Dividend policy

According to the Bylaws and Policy on allocation of income, approved on July 26, 2021, by the Board of Directors, the Company must distribute as a mandatory dividend each year ending December 31, provided that there are amounts available for distribution, an amount equivalent to 25% of Adjusted Net Profit.

It is mandatory to maintain a legal reserve, to which the Company must allocate 5% of net profit for each fiscal year, until the amount of this reserve is equivalent to 20% of capital.

The distribution of annual dividends is decided by the Annual Shareholders’ Meeting.

On March 22, June 15, September 12 and December 12, 2022, TIM S.A. announced that its Board of Directors approved the distribution of R$ 195 million, R$ 270 million, R$ 480 million and R$ 455 million, respectively, as Interest on Shareholders’ Equity (“JSCP”). The payments occurred on April 27, 2022, July 20, 2022, October 31, 2022, January 24, 2023 and January 31, 2023, and the dates of March 28, June 23, September 21 and December 21, 2022 served to identify shareholders entitled to receive such amounts. Thus, the shares acquired after those dates were ex-Interest on own capital rights. Accordingly, TIM declared a total amount of R$ 1,400 million of interest on own capital in 2022.

9.12. Events for the Year and Subsequent Events

COMPLETION OF THE PURCHASE OF THE ASSETS OF OI’S MOBILE TELEPHONY OPERATION

On April 20, 2022, TIM, together with Telefônica Brasil S.A. and Claro S.A., after complying with the precedent conditions established by CADE and Anatel, announced the completion of the acquisition process of the mobile assets of Oi Móvel S.A. (“Oi Móvel”). With the conclusion of the transaction, TIM now holds 100% of the share capital of Cozani RJ Infraestrutura e Rede de Telecomunicações S.A., a company that corresponds to the part of the unit of assets, rights and obligations of Oi Móvel acquired by Company. For further details on the process completion, please access the Material Fact.

TIM OBTAINS THE RIGHT TO EXERCISE THE 8^TH TRANCHE OF THE SUBSCRIPTION WARRANT AT C6 BANK

In October 2022, TIM obtained the right to vesting of the 8^th tranche of the subscription warrant to indirectly take part to the C6 share capital as due to the achievement of 8^th level of goals agreed in the ambit of partnership, which means the accumulated indirect potential interest of roughly 5.52% of C6’s share capital, subject to the outcome of the ongoing arbitration.

CHANGES TO THE ADJUSTED CLOSING PRICE FOR THE ACQUISITION OF OI’S MOBILE ASSETS AND START OF THE ARBITRATION PROCEDURE

In a Material Fact released on September 19, 2022, TIM S.A. communicated that the “Buyers” (TIM, Telefônica Brasil S.A. and Claro S.A.) of the mobile assets of Oi Móvel S.A. (“Seller”) identified differences in the assumptions and calculation criteria that, under the terms of the Share Purchase and Sale Agreement and Other Covenants (“SPA”), justify a proposal to change the Adjusted Closing Price (“ACP”) on behalf of TIM in approximately R$ 1.4 billion. In addition to the differences regarding the ACP, differences have been identified regarding the SPE Cozani contracts with companies providing mobile infrastructure services (lease of sites/towers), which, under the terms of the SPA, give rise to an indemnity from the Seller to TIM of approximately R$ 231 million. As a result of the differences, the amount of R$ 634 million that was retained by TIM was not transferred to the Seller.

In a Material Fact released on October 3, 2022, considering the Seller’s express violation of the dispute resolution mechanisms provided for in the SPA, TIM communicated that the Buyers had no alternative but to file an arbitration procedure with the Market Arbitration Chamber of B3 S.A. - Brasil, Bolsa, Balcão against the Seller to determine the effective amount of the adjustment to the ACP, in the form of the SPA.

In a Material Fact released on October 4, 2022, the Company was surprised by news published by the press and by a Material Fact released by the Seller on the aforementioned date that a preliminary decision had been handed down by the 7^th Business Court of the Judicial District of Rio de Janeiro determining the deposit in court by the Buyers of approximately R$ 1.53 billion – of which approximately R$ 670 million by TIM – in an account linked to the Seller’s court-ordered reorganization process, where it will be safeguarded until a later decision by the arbitration court.

TIM appealed against the decision and, on October 17, 2022, the Superior Court of Justice, in a monocratic decision, rejected the appeal by TIM and the other Purchasers. Thus, on October 19, 2022, TIM deposited the amount of R$ 670 million in guarantee for the Judgment of the 7th Corporate Court of the Judicial District of Rio de Janeiro.

NEW INTERIM CFO/ IRO

In January 2023, TIM announced that the Company’s Board of Directors elected Mr. Alberto Mario Griselli, Chief Executive Officer (“CEO”) of the Company, to assume the positions of Chief Financial Officer (“CFO”) and Investor Relations Officer (“IRO”), on an interim basis, as of February 1, 2023. Thus, the positions of CEO, CFO and IRO will be temporarily accumulated by Mr. Griselli.

10. Independent Audit Firm – CVM Normative Instruction 381

In 2021, Ernst & Young Auditores Independentes Ltda. provided audit services of our financial statements and other non-audit services, which are related to the review of the Company’s Sustainability Report.

Such services did not exceed the level of 5% of the total fees related to the external audit service.

In line with the external auditors’ understanding, the provision of other professional services not related to the external audit, as described above, does not affect the independence or objectivity in conducting the audit exams carried out. The independent auditors have internal processes to ensure that these other services are assessed internally, as well as pre-approved before submitting any proposal to TIM.

The Company also highlights that it is subject to a policy, approved by the Board of Directors as of September 24, 2021, which regulates the process of hiring external auditors, as well as any services not related to the audit of the financial statements, establishing, among other aspects, that the contracting must be submitted to the prior analysis of the Statutory Audit Committee of the Parent Company. This document also defines an illustrative list of services not related to audit whose contracting is prohibited.

11. Capital Market

TIM S.A.’s common shares are traded on the São Paulo Stock Exchange (B3) under the ticker TIMS3 and the ADRs, American Depositary Receipts, on the New York Stock Exchange (NYSE), under the ticker TIMB.

The São Paulo Stock Exchange Index (Ibovespa) ended 2022 at 109,735 points, accumulating an increase of 4.49% when compared to the previous year, with a market value of R$ 3.5 trillion.

The Company ended 2022 with its common shares quoted at R$ 12.40 on the B3, accounting for a decrease of 5.7% YoY, while the ADRs on the NYSE closed at US$ 11.73, accounting for an increase of 0.3% YoY. In terms of market value, TIM ended the year valued at R$ 30.0 billion or US$ 5.7 billion.

Final Considerations

TIM S.A., with the permanent objective of maintaining continuous, balanced and sustainable growth, would like to thank its customers for their loyalty and reiterates its commitment to tirelessly seek mechanisms to reciprocate the preference through quality and differentiated service. We would also like to thank our commercial partners, suppliers and financial institutions for their support and trust and, particularly, our employees, without whom the objectives would not have been achieved and, finally, the shareholders for their support and trust in the company’s management.

The Management

1.       Operations

1.1. Corporate Structure

TIM S.A. (“TIM” or “Company”) is a public limited company with Registered office in the city of Rio de Janeiro, RJ, and a subsidiary of TIM Brasil Serviços e Participações S.A. (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia Group that held 66.59% of the share capital of TIM S.A. on December 31, 2022 (66.59% on December 31, 2021).

The TIM group (“Group”) comprises TIM, its subsidiary and associated company, Cozani and I-Systems, respectively.

The Company holds an authorization for Landline Switched Telephone Service (“STFC”) in Local, National Long-Distance and International Long-Distance modes, as well as Personal Mobile Service (“SMP”) and Multimedia Communication Service (“SCM”), in all Brazilian states and in the Federal District.

The Company’s shares are traded on B3 – Brasil, Bolsa, Balcão (“B3”). Additionally, TIM has American Depositary Receipts (ADRs), Level II, traded on the New York Stock Exchange (NYSE) – USA. As a result, the company is subject to the rules of the Securities and Exchange Commission (“CVM”) and the Securities and Exchange Commission (“SEC”). In order to comply with good market practices, the company adopts as a principle the simultaneous disclosure of its financial information in both markets, in reais, in Portuguese and English.

As of December 31, 2022, TIM holds a 49% equity interest (49% as of December 31, 2021) in the companies I-Systems (associate), formerly FiberCo Soluções de Infraestrutura S.A. (“FiberCo”), and 100% (it had no interest as of December 31, 2021) in the company Cozani RJ Infraestrutura e Rede de Telecomunicações S.A. (“Cozani”) - subsidiary. We describe below the processes in the corporate reorganization regarding these two companies:

1.2. Corporate Reorganization

1.2.1. Business combination - Cozani

On April 14, 2022, TIM, Telefônica Brasil S.A. and Claro S.A. (“Buyers”) delivered to Oi Móvel S.A. – Under court-ordered reorganization (“Seller”, “Assignor” or “Oi Móvel”) the closing notification regarding the process of acquisition of the Seller’s mobile assets, based on the approvals by the Administrative Council for Economic Defense (CADE), upon signature of an Agreement on Control of Concentrations, whose decision has already become final and unappealable, and by the National Telecommunications Agency (ANATEL), particularly with the publication of Acts 4.949/2022, 4.950/2022 and 4.951/2022, in addition to meeting or waived by the Buyers, as the case may be, all precedent contractual conditions.

On April 20, 2022, TIM S.A., together with the Buyer companies, after complying with the previous conditions established by CADE and ANATEL, concluded the acquisition transaction, with TIM, which currently holds 100% of the share capital of Cozani, a company that corresponds to the part of the unit of assets, rights and obligations of Oi Móvel acquired by Company.

The Company has been complying with all the measures provided for in Anatel’s conditions and in the Concentration Control Agreement (“ACC”) entered into with CADE, mainly, among others:

On April 19, 2022, TIM made the Product Reference Offer available in the wholesale ROAMING market (“ORPA – National Roaming”), which was approved by Anatel on September 21, 2022. On the same date, it made the Reference Offer for Mobile Virtual Network Operators (“Reference Offer – MVNO”) available, which was approved by Anatel on September 26, 2022.

On July 4, 2022, TIM independently made public offers for the disposal of up to 50% of Radio Base Stations (“RBDs”) acquired from Oi Móvel (“Public Offerings of RBSs”). It has not been possible to conclude any sales proposal related to the offer so far.

On August 15, 2022, TIM signed an Radiofrequency Availability Agreement with Oi l in order to allow Oi, to achieve the targets for implementation of fixed wireless access systems set forth in the General Plan of Universalization Targets for the Universalization of the Switched Fixed Telephone Service Provided in the Public Regime (PGMU-IV), approved by Decree 9.619/2018. The purpose of this agreement, as determinated by Anatel, is to enable the continuity of targets already met, and the fulfillment of non-complied and enforceable targets. This agreement is valid until the end of Oi’s STFC concession on December 31, 2025, and it registered as the service becomes available.

On July 5, 2022, TIM and Oi Móvel signed a Letter of Intent to guarantee the maintenance and continuity of the mobile services provided at the Comandante Ferraz Antarctic Station (EACF) until the end of the term, on February 21, 2024 of Cooperation Agreement 12.000/2019-001/00, signed on February 21, 2019 by the Federal Government, through the Navy Command, and by Telemar Norte Leste and Oi Móvel. The signing arrangements for the First Amendment to the Cooperation Agreement, which formalizes the result of these negotiations, were concluded on December 9, 2022.

On October 20, 222, TIM published Offers intended to enable the signing of an Industrial Network Exploration Agreement (“Offer – Industrial Network Exploration”) and Temporary and Onerous Assignment of Rights of Use of Radiofrequency (“Offer – Radiofrequency”), under the terms defined by the ACC (Agreement on Control of Concentrations) signed with CADE. The offers were published on TIM’s website and presented to CADE, on the same date, within the period established by ACC (up to 6 months from Closing and should be available for 36 months. No contracts have been signed so far

On December 20, 2022, TIM published offers intended to enable the signing of a Contract for the Temporary and Onerous Assignment of Rights of Use of the 900 MHz Radiofrequency, having as its object the radio frequencies acquired from Oi Móvel in said frequency band (“Offer – 900 MHz Radiofrequency”), under the terms defined by ACC signed with CADE. The ACC awaits dispatch order by CADE. The offers were published on TIM’s website and presented to CADE on the same date, within the period established by ACC (up to 8 months from Closing) and must be available for 36 months. No contracts have been signed so far.

The acquisition price of 100% of Cozani’s shares, after all the adjustments provided for in the Share Purchase Agreement, was R$ 7,014.6 million.

Adjusted Closing Price:

In addition to the above amounts, the Seller may be entitled to receive up to an additional R$ 230 million from TIM, conditioned to the achievement, up to March 31, 2023, of certain targets related to the radio frequencies and customer base involved in the Transaction. Of this amount, R$ 120 million have already been paid due to the fulfillment of part of the established targets. Of the remaining amount not yet paid (R$ 110 million), the Company understands that it is expected to disburse the amount of R$ 77 million up to the described term recognized as contingent consideration on the date of disclosure of this financial information.

TIM also paid, on April 20, 2022, on behalf of SPE Cozani, the amount of R$ 250.7 million to the Seller, as remuneration, for up to 12 months of service provision in the transition phase, recorded under “Prepaid expenses” and signed an annual contract term for the use of transport infrastructure capacity with Brasil Telecom Comunicação Multimídia S.A., involving the payment of decreasing amounts which, at present value, total approximately R$ 476 million.

As of December 31, 2022, the total consideration transferred for the acquisition of Cozani was R$ 7,211.6 million.

Identifiable assets acquired and liabilities assumed

On December 31, 2022, the fair value of the identifiable assets acquired and liabilities assumed from Cozani on the date of acquisition by TIM S.A. is finalized, according to the purchase price allocation report (“Price purchase allocation”). On this date, the analysis indicates assets and liabilities presented below:

The assets acquired and liabilities assumed related to Cozani (“net assets”) by TIM on the acquisition date and the impacts on the Company’s consolidated results, which reflect the results of the Company acquired as of April 30, 2022, are summarized below:

The goodwill paid of R$ 2,636,426 comprises the value of future economic benefits arising from synergies expected from the acquisition. Goodwill is allocated on a consolidated basis as the assets acquired and liabilities assumed bring benefits to the business as a whole. There is no expectation that the goodwill recognized will be deductible for tax purposes until the corporate merger of the company Cozani takes place, which should occur throughout 2023.

Other contractual obligations

As a result of certain contractual provisions upon the acquisition of Cozani, TIM withheld the amount equivalent to 10% of the transaction Closing Price. On December 31, 2022, this amount reached R$ 671 million and, due to the preliminary decision of the 7^th Corporate Court of the Judicial District of Rio de Janeiro, the amount is in a judicial deposit account until further decision by the Court of Arbitration. 

Also, at the time of the acquisition of Cozani, there were certain contractual provisions linked to the fulfillment of migration targets by the Oi Group, in the amount of R$ 77 million. The fulfillment of these targets is under the evaluation of the Company’s Management.

On December 31, 2022, both obligations reached the total amount of R$ 748 million.

1.2.2 Sale of 51% of I-Systems (formerly FiberCo) to IHS

In December 2020, FiberCo was established by the Company to segregate network assets and provide infrastructure services. FiberCo was born to implement, operate and maintain last-mile infrastructure for broadband access to be offered in the wholesale market. Nevertheless, the terms of the agreement define TIM as current main customer, having the prerogative of 6 months of exclusivity after entering new areas.

On May 5, 2021, the Company disclosed the decision of its Board of Directors on the sale by TIM of 51% of the share capital of FiberCo in favor of IHS Fiber Brasil - Cessão de Infraestruturas Ltda. (“IHS”), with the remaining 49% remaining under the control of the Company upon closing of the transaction.

According to the valuation report of the net assets and liabilities, the calculated amount of R$ 1,211,789 was paid-in as share capital of I-Systems on November 1, 2021.

The process for acquisition of equity interest at FiberCo, later named I–Systems, by IHS was completed on November 16, 2021. As a result, IHS currently holds 51% of the share capital of I-Systems, with TIM having a minority (non-controlling) interest of 49% in I-Systems. As of this moment, TIM ceased the line-by-line consolidation of I-Systems (formerly FiberCo).

For the conclusion of the sale, IHS made a capital contribution of R$ 582,498 (primary) in the new company (I-Systems) and the payment of R$ 1,096,294 (secondary) directly to TIM, thus totaling R$ 1,678,792 for the acquisition of a 51% equity interest. The fair value calculated for 100% of the new company was R$ 3,291,794.

Upon closing, the remaining non-controlling interest of 49% in the investee was recorded by TIM at fair value in the amount of R$ 1,612,957, as provided for by IFRS 10 (CPC 36). As provided for in IAS 28 (CPC 18), the sale of an investment with loss of control must be recognized by the total write-off of the investment and recognition of part of the associated company’s investment at fair value.

Subsequently, the interest in the investee started to be valued under the equity method, as defined in IAS 28 (CPC 18).

Currently, due to the closing of the transaction and loss of I- Systems’s control, TIM wrote-off about 90% of the total goodwill recorded in the acquisition of TIM Fiber SP Ltda. and TIM Fiber RJ S.A. in the amount of R$ 1,051,477.

The effects of the transaction are detailed below:

2.       Preparation basis and presentation of the individual and consolidated financial statements

The individual and consolidated financial statements were prepared and are being presented according to the accounting practices adopted in Brazil, which comprise the CVM standards and pronouncements, guidance and interpretations issued by the Accounting Pronouncement Committee (“CPC”) and in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Additionally, the Company considered the guidelines provided for in Technical Guideline OCPC 07 - Evidencing upon Disclosure of General Purpose Financial-Accounting Reports in the preparation of its financial statements. Accordingly, relevant information of the financial statements is being evidenced and corresponds to the information used by management when administrating.

The significant accounting policies applied in the preparation of these financial statements are below and/or presented in its respective notes. Those policies were consistently applied in the years presented.

a. General criteria for preparation and disclosure

The individual and consolidated financial statements were prepared considering the historical cost as value basis and financial assets and liabilities (including derivative financial instruments) measured at fair value.

Assets and liabilities are classified according to their degree of liquidity and collectability. They are reported as current when they are likely to be realized or settled over the next 12 months. Otherwise, they are recorded as non-current. The exception to this procedure involves deferred income tax and social contribution balances (assets and liabilities) and provision for lawsuits and administrative proceedings that are fully classified as non-current.

The Company had a profit of R$ 1,670,755 as of December 31, 2022. The Company’s current liabilities exceeded total current assets by R$ 2,229,118, caused by the acquisition of Cozani and payment of obligations related to the 5G license. The Company understands that the aforementioned investments will bring relevant benefits and operational efficiency. On December 31, 2022, the Company’s shareholders’ equity is positive by R$ 25,397,365.

In connection with the preparation of these financial statements, Company’s Management made analyses and concluded that as there is no evidence of uncertainties about the going concern.

The presentation of the Statement of Value Added is required by Brazilian corporate law and the accounting practices adopted in Brazil applicable to publicly-held companies. The DVA was prepared according to the criteria set forth in CPC Technical Pronouncement No. 09 - “Statement of Value Added”. IFRS does not require the presentation of this statement. Accordingly, in conformity with IFRS, this statement is presented as supplementary information, without prejudice to financial statements as a whole.

Interests paid are classified as financing cash flow in the statement of cash flows as it represents costs of obtaining financial resources.

b. Functional and presentation currency

The currency of presentation of the financial statements is the Real (R$), which is also the functional currency of the Company, its associated company and subsidiary.

Foreign currency transactions are recognized at the exchange rate on the date of the transaction. Monetary items in foreign currency are translated into Brazilian reais at the foreign exchange rate prevailing on the balance sheet date, informed by the Central Bank of Brazil. Foreign exchange gains and losses linked to these items are recorded in the statement of income.

Operating segments are components of the entity that carry out business activities from which revenues can be obtained and expenses incurred. Its operating results are regularly reviewed by the entity's main operations manager, who makes decisions on resource allocation and evaluates segment performance. For the segment to exist, individualized financial information is required.

The main operational decision maker in the Company, responsible for the allocation of resources and periodically evaluating performance, is the Executive Board, which, along with the Board of Directors, are responsible for making the strategic decisions of the company and its management.

The Group's strategy is focused on optimizing results, and all the operating activities of the Group are concentrated in TIM and its subsidiary Cozani. Although there are diverse activities, decision makers understand that the company represents only one business segment and do not contemplate specific strategies focused only on one service line. All decisions regarding strategic, financial planning, purchases, investments and investment of resources are made on a consolidated basis. The aim is to maximize the consolidated result obtained by operating the SMP, STFC and SCM licenses.

Subsidiaries are all the entities in which the Group retains control. The Group controls an entity when it is exposed to, or has a right over the variable returns arising from its involvement with the entity and has the ability to interfere in those returns due to its power over the entity. The subsidiaries are fully consolidated as of the date control is transferred to the Group. Consolidation is interrupted beginning as of the date in which the Group no longer holds control.

If the Group loses control exercised over a subsidiary, the corresponding assets (including any goodwill) and liabilities of the subsidiary are written-off at their book values on the date the control is lost, and the write-off of the book value of any non-controlling interests on the date when control is lost (including any components of other comprehensive income attributed to them) also occurs. Any resulting difference as a gain or loss is recorded in income (loss). Any retained investment is recognized at its fair value on the date control is lost.

Intercompany transactions, as well as the balances and unrealized gains and losses in those transactions, are eliminated. The base date of the financial information used for consolidation purposes is the same for all the companies in the Group.

There are no consolidated balances for the balance sheet as of December 31, 2021 since the comparative consolidated balances in December 2021 were not presented, since the subsidiary I-Systems (formerly FiberCo) was incorporated in December 2020 and, as described in Note 1, had 51% of its equity interest sold to IHS in November 2021, when TIM now holds a non-controlling minority interest of 49%. At that moment, TIM started having I-Systems as an associated company and to record the income (loss) of this company under the equity method, no longer consolidating it.

The Company’s consolidation base on December 31, 2022 includes the wholly-owned subsidiary Cozani, which is mainly engaged in the provision of telecommunications services, headquartered in Rio de Janeiro, Brazil. The company holds 100% interest, due to the acquisition of this company, as described in Note 1.

As of December 31, 2021, there are no subsidiaries, so the balances presented are individual.

Business combinations are accounted for under the acquisition method. The cost of an acquisition is measured for the consideration amount transferred, which is valuated on fair value basis on the acquisition date, including the value of any non-controlling interest in the acquiree, regardless of their proportion. For each business combination, the buyer must measure the non-controlling interest in the acquired business at the fair value of based on its interest in the net assets identified in the acquired business. Costs directly attributable to the acquisition are accounted for as expense when incurred.

The purchase accounting method is used to record the acquisition of subsidiaries by the Group. The acquisition cost is measured as the fair value of the assets acquired, equity instruments (i.e.: shares) and liabilities incurred or assumed by the acquirer on the date of the change of control. Identifiable assets acquired, contingencies and liabilities assumed in a business combination are initially measured at fair value on the date of acquisition, regardless of the proportion of any minority interest. The portion exceeding the transferred consideration of the Company's interest in the acquired identifiable net assets, is recorded as goodwill. Should the consideration transferred be less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly in the statement of income as a revenue once concepts and calculations applied are reviewed.

On acquiring a business, the Group assesses the financial assets and liabilities assumed in order to rate and to allocate them in accordance with contractual terms, economic circumstances and pertinent conditions on the acquisition date, which includes segregation by the acquired entity of built-in derivatives existing in the acquired entity’s host contracts.

Any contingent payments to be transferred by the acquiree will be recognized at fair value on the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability should be recognized in accordance with CPC 48 in the statement of income.

Initially, goodwill is initially measured as being the excess of consideration transferred in relation to net assets acquired (acquired identifiable assets and assumed liabilities) measured at fair value on acquisition date. If consideration is lower than fair value of net assets acquired, the difference must be recognized as gain in bargain purchase in the statement of income on the acquisition date.

After initial recognition, the goodwill is carried at cost less any accumulated loss for the impairment losses. For impairment testing purposes, goodwill acquired in a business combination is, from the acquisition date, allocated to each cash-generating units of the Group that are expected to benefit by the synergies of combination, regardless of other assets or liabilities of the acquiree being allocated to those units.

When the goodwill is part of a cash generating unit and a portion of this unit is disposed of, the premium associated with the disposed portion should be included in the cost of the operation when calculating gains or losses in the disposal. The goodwill disposed under these circumstances of this operation is determined based on the proportional values of the portion disposed of, in relation to the cash generating unit maintained.

The Group measures the lease liabilities assumed at the present value of the remaining payments as if the lease agreement acquired were a new lease agreement at the acquisition date. Right-of-use assets were measured at an amount equivalent to the lease liabilities and adjusted to reflect the favorable or unfavorable terms of these leases compared to market terms. Considering that the off-market nature of said lease is reflected in the right-of-use asset, the Group does not recognize separately an intangible asset or liability relating to favorable or unfavorable terms in relation to market value.

These individual and consolidated financial statements were approved by the Board of Directors of the Company on February 9, 2023.

The following new standards/amendments were issued by the Accounting Pronouncement Committee (“CPC”) and International Accounting Standards Board (IASB), are effective for the year ended December 31, 2022.

Amendments to CPC 37 (R1), CPC 48, CPC 29, CPC 27, CPC 25 and CPC 15 (R1).

The changes to the above pronouncements are due to the annual changes related to the cycle of improvements between 2018 and 2020, such as:

The validity of these proposed changes must be established by regulatory agencies that approve them and to fully comply with international accounting standards, the entity must apply them in annual periods beginning on or after January 01, 2022.

Onerous Contracts – Cost of Fulfilling a Contract

An onerous contract is a contract under which the unavoidable costs of fulfilling the obligations arising from the contract (i.e., costs that the Group cannot avoid since it has the contract) exceed the expected economic benefits to be received.

The amendments specify that, when assessing whether a contract is onerous or loss-making, an entity needs to include costs that directly relate to a contract to supply goods or services, including incremental costs (for example, direct labor costs and materials) and an allocation of costs directly related to contract activities (for example, depreciation of equipment used to fulfill the contract and costs of managing and supervising the contract). General and administrative costs are not directly related to a contract and are excluded unless explicitly charged to the counterparty under the terms of the contract.

The Group evaluated the contracts and did not identify material changes in the financial statements.

Property, Plant and Equipment – Proceeds before Intended Use;

The amendment preclude entities from deducting from the cost of a property, plant and equipment item any proceeds from sales of produced items in bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the products of selling the items, and the costs of producing the items, in the statement of income.

Under the transition rules, the Group applies the amendments retrospectively only to property, plant and equipment items available for use or after the beginning of the earliest period presented when the entity first applies the amendment (the date of first-time adoption).

These changes had no impact on the Group’s individual and consolidated financial statements as there were no sales of such items produced by property, plant and equipment made available for use or after the beginning of the earliest period presented.

References to the Conceptual Framework

The amendments replace a reference to an earlier version of the IASB Conceptual Framework with a reference to the current version issued in March 2018, without materially changing its requirements.

The amendments add an exception to the recognition principle of IFRS 3/CPC 15 (R1) Business Combinations to avoid issuing potential ‘day 2’ gains or losses arising from liabilities and contingent liabilities that would be within the scope of IAS 37/CPC 25 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, rather than the Conceptual Framework, to determine whether a present obligation exists at the acquisition date.

The amendments also add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition on the acquisition date.

Pursuant to the interim provisions, the Group applies the amendments prospectively, i.e., for business combinations that occur after the start of the annual reporting period in which it first applies the amendments (the date of first-time adoption).

These changes had no impact on the Group’s consolidated financial statements since there were no assets, liabilities or contingent liabilities within the scope of these changes that arose during the period.

IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as first-time adopter

The amendment allows a subsidiary that chooses to apply paragraph D16(a) of IFRS 1/CPC 37 (R1) - First-time Adoption of International Accounting Standards to measure cumulative translation differences using the amounts reported in the consolidated financial statements of the parent company, based on the parent company’s transition date to IFRS, if no adjustments have been made for consolidation procedures and for the effects of the business combination in which the parent company acquired the subsidiary. This amendment also applies to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.

These changes had no impact on the Group’s consolidated financial statements as it is not a first-time adopter.

IFRS 9/CPC 48 Financial Instruments - Rates in the ’10 percent’ test for writing-off financial liabilities

The amendment clarifies the rates that an entity includes when assessing whether the terms of a new or modified financial liability are materially different from the terms of the original financial liability. These rates include only rates paid or received between the borrower and the lender, including rates paid or received by the borrower or the lender on behalf of the other.

In accordance with the interim provisions, the Group applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment (the date of first-time adoption). These changes had no impact on the Group’s consolidated financial statements, as there were no changes to the Group’s financial instruments during the period.

The following new standards were issued by Comitê de Pronunciamentos Contábeis [Accounting Pronouncement Committee] (CPC) and the International Accounting Standards Board (IASB), but are not in effect for the period ended on December 31, 2022.

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1, related to CPC 26, aiming to specify the requirements for classifying the liabilities as current or non-current. The amendments clarify the following:

Amendments are valid for periods started on January 1, 2023 and must be applied on a retrospective basis. The Group currently assesses the impact that the changes will have on current practice and whether existing loan agreements may require renegotiation.

(equivalent to revision 20 of the Accounting Pronouncements Committee)

In February 2021, IASB issued amendments to IAS 8/CPC 23, in which the definition of ‘accounting estimates’ is introduced. The amendments clarify the difference between changes in accounting estimates and changes in accounting policies and errors. Additionally, they clarify how entities use measurement and input techniques to develop accounting estimates.

The amendments will become effective for periods beginning on or after January 1, 2023 and will be applied to changes in accounting policies and estimates that occur on or after the beginning of that period. If disclosed, early adoption is allowed.

Amendments are not expected to have a significant impact on the Group’s financial statements.

In February 2021, IASB issued amendments to IAS 1/CPC 26 (R1)) and IFRS Practice Statement 2 Making Materiality Judgments, in which guides and examples are provided to help entities to apply materiality judgment to the disclosure of accounting policies. The aim of amendments is to assist entities in the disclosure of accounting policies that are most useful by replacing the requirement for disclosure of significant accounting policies to material accounting policies and adding guides about how entities should apply the concept of materiality to make decisions about the disclosure of accounting policies.

The amendments to IAS 1 are applicable for periods started as of or after January 1, 2023, with early adoption allowed. Since the amendments to Practice Statement 2 provide non-mandatory guides about the application of material definition to the accounting policy information, an adoption date is not required for this amendment.

The Group is currently revisiting the accounting policy disclosures to confirm that they are consistent with the required changes.

In May 2021, the Board released amendments to IAS 12, which narrow the scope of the initial recognition exception under IAS 12 so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.

The amendments shall apply to transactions occurring in annual periods beginning on or after the earliest comparative period presented. Furthermore, at the beginning of the earliest comparative period presented, a deferred tax asset (provided there is sufficient taxable profit available) and a deferred tax liability must also be recognized for all deductible and taxable temporary differences associated with leases and decommissioning obligations.

The Group is currently assessing the impact of these changes.

COVID-19 impacts

Since March 2020 a pandemic was declared by the World Health Organization due to the outbreak of the new Coronavirus (COVID-19). The main impacts and first cases were recorded in Brazil and in the world also in the first quarter of 2020.

The Company has a robust infrastructure and is part of an extremely important segment in this period of crisis, essential for the population, government and health system since 2020.  After an internal analysis, there was no indication of impairment of assets or risks associated with the fulfillment of obligations, since the Company is not highly leveraged and still has credit lines available to be used in the event of a significant reduction in cash volume. 

In September 2021, the country showed a significant evolution in vaccination levels, with a reduction in the transmission rate and number of cases. Thus, there was a slight improvement in economic activities. In June, the stores returned with activities with a positive impact on device sales.

Currently, we have not identified material impacts on the Company’s individual and consolidated financial statements.

3.       Estimates and areas where judgment is significant in the application of the Company's accounting policies

Accounting estimates and judgments are continuously assessed. They are based on the Company's historical experience and on other factors, such as expectations of future events, considering the circumstances present on the base date of financial statements.

By definition, the resulting accounting estimates will rarely be the same as the actual results. The estimates and assumptions that present a significant risk, with the probability of causing a material adjustment to the book values of assets and liabilities for the fiscal period, are covered below.

(a)       Impairment loss on non-financial assets and investments in subsidiary and associated company.

Impairment losses occur when book value of an asset or cash generating unit exceeds its recoverable value, which is the highest of fair value less selling costs and value in use. Calculation of fair value less selling costs is based on information available on similar assets’ selling transactions or market prices less additional costs to dispose of the asset. The calculation of value in use is based on the discounted cash flow model.

Any reorganization activities with which the Company is not committed to on the reporting date of the Presentation of financial statements or significant future investments that could improve the asset base of the cash generating unit under test are excluded for impairment testing purposes.

The main non-financial assets for which this assessment was made are goodwill recorded by the Company (Note 16) and its tangible and intangible assets.

Net investments in the subsidiary and associated company are valued after applying the equity method to determine whether there is any objective evidence of impairment. The recoverable amount of an investment in an associated company must be determined for each investment, unless the associated company does not generate cash inflows on an ongoing basis that are largely independent of those generated by the entity’s other assets. The investment in an associated company was valued as described in Note 14.

(b)       Income tax and social contribution (current and deferred)

Income tax and social contribution (current and deferred) are calculated according to interpretations of current legislation and CPC 32 / IAS 12. This process typically involves complex estimates to determine taxable income and temporary differences. In particular, the deferred assets on tax losses, negative basis of social contribution and temporary differences is recognized in proportion to the probability that future taxable income is available and can be used. The measurement of the recoverability of deferred income tax on tax losses, negative basis of social contribution and temporary differences takes the history of taxable income into account, as well as the estimate of future taxable income (Note 10).

(c)       Provision for legal and administrative proceedings